U.S. Fire Ins. Co v. National Union Fire Ins. Co.

• Citation: 165 Cal.Rptr. 726,107 Cal.App.3d 456
• Parties: UNITED STATES FIRE INSURANCE COMPANY, a corporation, Plaintiff and Respondent, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PENNSYLVANIA, a corporation, Defendant and Appellant. Civ. 57922.
• Decision Date: 25 June 1980
• Court: California Court of Appeals Court of Appeals

Page 726

165 Cal.Rptr. 726

107 Cal.App.3d 456

UNITED STATES FIRE INSURANCE COMPANY, a corporation, Plaintiff and Respondent, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PENNSYLVANIA, a corporation, Defendant and Appellant.

Civ. 57922.

Court of Appeal, Second District, Division 3, California.

June 25, 1980.

As Modified July 10, 1980.

Hearing Denied Aug. 20, 1980.

Kern & Wooley, John R. Johnson, Los Angeles, and Ralph S. LaMontagne, Jr., for defendant and appellant.

Clausen, Harris & Campbell, and Kenneth H. Clausen, Los Angeles, for plaintiff and respondent.

POTTER, Acting Presiding Justice.

Defendant National Union Fire Insurance Company of Pittsburgh, Pennsylvania (hereinafter National) appeals from a judgment in favor of plaintiff United States Fire Insurance Company (hereinafter United). The judgment declared the respective parties' obligations as insurers in respect of an aircraft accident in which Philip Morgan, Jr. was the pilot. Claims for the resultant deaths and injuries were settled by United for $1,527,000, with a contribution of $300,000 from a non-party carrier. The judgment decreed that with respect to the accident:

". . . Defendant's policy AV 347207 covered Philip Morgan, Jr., as an insured and is underlying insurance as to Plaintiff's policy DCL 002799 which likewise covered Philip Morgan, Jr., as an insured. That Defendant's policy must be exhausted before Plaintiff's policy comes into play and/or before any payment is due under Plaintiff's policy, and that Plaintiff, having paid $1,000,000 in settlements that should have been paid by Defendant, is entitled to reimbursement in the amount of $1,000,000 from Defendant plus interest at the legal rate from the date Plaintiff made its payment; to wit, from September 1, 1976."

The judgment also awarded United judgment against National in the amount of $1,000,000 plus interest.

The evidence before the trial court consisted of an oral stipulation of facts, documentary exhibits 1 through 5, and four depositions which were received in evidence though not marked as exhibits or numbered as such. The oral stipulation provided as follows:

"MR. CLAUSEN (Counsel for Plaintiff): The following facts are stipulated to, for the purposes of this coverage dispute only, and are not binding and have no application in any other proceeding:

"That the accident giving rise to this coverage dispute occurred on October 18, 1974, on which date at Long Beach Airport, Philip Morgan, Jr., piloting a Piper Aztec aircraft, struck a gas storage tank shortly after takeoff. The Piper Aztec then crashed to the ground, all of which caused the death of Morgan and certain deaths and injuries.

"That Philip Morgan, Jr. was negligent; that such negligence approximately (sic ) (caused) the accident the resulting deaths and injuries.

"That the occupants of the Piper Aztec at the time of the accident were Philip Morgan, Jr. as pilot, Robert DeRobertis, John C. Whipperman, and Peter Tilson, all of whom sustained fatal injuries, and James Reynolds who sustained serious bodily injury, but who survived the crash.

"That at the time of the accident, Philip Morgan, Jr. was president and chairman of the directors of US West Investments, Golden Pacific Insurance and any and all other subsidiary corporations of US West Investments. That at the time of said accident, Philip Morgan, Jr. was engaged in business activities on behalf of said corporate entities, taking clients and (pro)spective clients on a hunting trip to promote the business of said corporations. That the accident thus arose out of the business of said corporations.

"That at the time of said accident, US West Investments was the record owner of a Beechcraft Bonanza aircraft which was described in the policy issued by defendant, which policy provided specific coverage for said described Beechcraft Bonanza, and in addition, defendant's policy provided coverage for the operations of nonowned aircraft. Prior to the accident, the specific liability coverage on the Beechcraft Bonanza had been deleted because said aircraft was down for a major overhaul and at the time of the accident, said overhaul had not been completed and the liability coverage on this aircraft had not yet been reinstated. The Piper Aztec aircraft was being used by Philip Morgan, Jr. at the time of said accident instead of the Beechcraft Bonanza, because said overhaul had not been completed.

"That the Piper Aztec aircraft was owned by National Aviation Company and had been either rented or loaned to either Golden Pacific Insurance or US West Investments for use at the time of said accident.

"That the INA (Insurance Company of North America) policy listed in plaintiff's policy as specifically scheduled underlying primary insurance, did not provide any coverage for the use of aircraft.

"The named insureds under plaintiff's policy were US West Investments, Golden Pacific Insurance and all other subsidiary operations of US West Investments and plaintiff's policy limits were $2,000,000 combined single limit per accident or occurrence.

"The named insured under defendant's policy was US West Investments and defendant's policy limits were $1,000,000 combined single limit per accident or occurrence.

"Coverage for any other entity or individual under both or either policy is left for the Court to decide. End of stipulation."

The documentary exhibits included copies of the policies issued by United and National. United's policy was captioned a "Commercial Comprehensive Catastrophe Liability Policy." The pertinent coverage was "to indemnify the insured for ultimate net loss in excess of the retained limit hereinafter stated, which the insured may sustain by reason of the liability imposed upon the insured by law . . . (f)or damages . . . because of personal injury, including death at any time resulting therefrom, sustained by any person or persons . . . ." The retained limit provision, so far as here pertinent, was as follows:

"(T)he company's liability shall be only for the ultimate net loss in excess of the insured's retained limit defined as the greater of:

"(a) the total of the applicable limits of the underlying policies listed in Schedule A hereof, and the applicable limits of any other underlying insurance collectible by the insured; or

"(b) an amount as stated in Item 4(C) ¹ of the declarations as the result of any one occurrence not covered by the said policies or insurance; . . ."

The definition of "insured" in the United policy included "any executive officer, director or stockholder of the named insured with respect to the use of an automobile or aircraft not owned by the named insured in the business of the named insured."

As a result of the above provision, it was apparent that Philip Morgan, Jr., individually, was an insured within the personal injury liability coverage of the United policy.

The National policy, on the other hand, clearly did not make Morgan an insured under its bodily injury coverage as of the date of the accident. As originally issued June 14, 1974, National's policy did extend bodily injury coverage to Morgan provided he was "using" the Beechcraft Bonanza aircraft of which U. S. West Investments was the record owner and which was described in the policy declarations, or was "legally responsible for its use." However, with respect to use of nonowned aircraft, such insured status was expressly withheld by an endorsement effective at the initiation of the policy. Coverage with respect to the operation of nonowned aircraft was limited to U. S. West Investments as named insured. The endorsement extending this coverage, for which an additional premium of $175 was charged, deleted the definition of "Insured" which applied to the described aircraft liability coverage as well as special provisions providing automatic insurance for newly acquired aircraft and a special provision governing "Use of Other Aircraft." However, before the accident occurred, further endorsements deleted altogether the described aircraft liability coverage, thus eliminating any coverage under which Morgan was an insured. A substantial premium refund accompanied the subsequent endorsement whereby, in effect, National refunded approximately $200 of a total liability premium of $525 which included $175 for the nonownership endorsement and $350 for the described aircraft liability. Inasmuch as the nonownership endorsement remained in effect for the full policy term, it is apparent that $200 of the $350 described aircraft liability coverage premium was refunded after approximately one-fourth of the policy term had expired. In consideration of this refund, U. S. West Investments became the sole insured for liability purposes and was covered only for use of nonowned aircraft in its behalf.

The stipulated facts, of course, show that both Morgan, personally, and U. S. West, vicariously, were liable for the damages arising from the crash of the nonowned Piper aircraft due to Morgan's negligence. Morgan was also an insured under an owner's policy covering the Piper aircraft. This policy had policy limits of $300,000 which sum was paid in full by the insurer, thus reducing the outlay for settlement to $1,227,000. The issue between United and National thus related to the allocation of responsibility between them for the remaining liability.

United contended that National was responsible to pay $1,000,000 of the loss because National's policy constituted "underlying insurance collectible by the insured," making "the insured's retained limit" under United's policy $1,300,000, ² so that United's indemnity agreement covered only the excess, or $227,000, leaving National responsible for its full policy limits.

National, on the other hand, contended that whereas United's policy extended coverage both to Morgan, individually, and to U. S. West Investments, National's policy expressly excluded Morgan as an insured in respect of liability arising from the...